Landlord’s Guide to Umbrella Insurance

Many rental property owners face significant financial exposure when they rent out their homes or apartments. Just one slip and fall accident or another such liability claim can not only ruin your day but can also force you to drain your savings account or even seek a bank loan to pay the costs of a lawsuit.  The solution: Landlord Umbrella Insurance. This type of insurance policy provides extra liability coverage above and beyond what’s provided by standard homeowner’s insurance. It’s often called excess liability insurance because it kicks in after the limits on your primary policies have been exhausted. 

Let’s take a look at why you should consider maintaining umbrella Insurance as a landlord and what you need to know before signing up for a policy.

What Is Umbrella Insurance?

Umbrella insurance protects you and your family from lawsuits. It provides extra liability coverage over and above the liability coverage included in your homeowner’s, renter’s, condominium, or automobile insurance policies. 

Modern umbrella insurance is specific to lawsuits, while the personal liability coverage included in your other policies covers you only for damages caused by accidents. 

For example, if one of your tenants sues you because of an injury that occurred on your property, umbrella insurance would provide coverage. If a guest trips and falls while visiting your home, however, umbrella Insurance would not apply.

What Does Umbrella Insurance Cover?

Umbrella insurance is intended to cover situations where you or someone else acts negligently and causes harm to others. It’s designed to cover costly liability claims and lawsuits that arise from accidents at your home or property. 

If someone is injured on your property and decides to sue, the costs of legal defense can be exceptionally high — and if you are found liable, the financial damages could be catastrophic. 

Umbrella insurance also covers situations where your other policies don’t provide enough coverage. Say you’re sued for more than the liability limits on your car insurance policy; an umbrella policy could help pay for the rest of what’s owed. Umbrella policies can also cover things like libel or slander.

What Isn’t Covered?

Umbrella insurance is a great way to protect yourself and your assets in the event of an accident. This is especially true if you’re a landlord.

Of course, umbrella insurance doesn’t cover everything. Umbrella insurance isn’t designed to protect you against intentional acts. If you commit an intentional act, then you’ll be responsible for any damage that results from that act. 

Umbrella insurance doesn’t cover automobile accidents. You need separate automobile liability coverage for that. Workers’ compensation claims aren’t covered by this type insurance either. You need workers’ compensation insurance to protect your business from these types of claims.

Lastly, umbrella insurance only covers liability claims that occur on your rental properties or as a result of your rental properties. 

Personal liability claims aren’t covered, even if they occur at the same time as a property claim. To get protection for personal liability claims, you need a personal umbrella policy instead of a commercial one.

How to Choose the Right Policy

Buying insurance is a smart way to protect your home and family from financial harm in the case of an accident. But the more assets you have, the more coverage you will need. The best insurance plan can offer high liability limits that are typically beyond the reach of other policies. 

Umbrella policies are fairly affordable. Coverage typically starts at $1 million, and your rates will vary depending on your needs and location. The price is well worth the peace of mind that comes with knowing you’re protected against financial loss should you ever be sued for more than your homeowner’s insurance will cover. 

Consider policies that issue covered perils and those that offer all-risk policies. An all-risk policy will cover any risk except for the ones specifically excluded. This breadth can be helpful if you have several kinds of rental units since all-risk policies are generally easier to customize than named peril policies. 

However, all-risk policies are also more expensive than named peril policies and may not be the right fit for landlords with lower budgets.

The Importance of Umbrella Insurance for Landlords

Umbrella insurance is important for landlords and property owners because it can cover losses that aren’t covered by existing policies or additional features; it provides extra liability protection. 

Modern umbrella insurance is an affordable layer of protection, so if concerns over potential lawsuits are causing stress, consider investing in this type of coverage.

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PayRent is on a mission to build a rent collection app that fosters a positive and productive relationship between renters and landlords. We focus less on transactions and more on the people behind them.

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